On Aug. 3, 2015, the United States-based Seven Seas Water announced that it had acquired Biwater (BVI) Holdings Ltd. and the accompanying 15-year contract to supply the territory with 2.3 million gallons of water per day.
Three days later, however, government alerted Seven Seas that it considered the purchase to be a breach of its 2010 agreement with Biwater, which officials have estimated to cost the government some $18 million annually.
The parties haven’t discussed the dispute for more than a year, and they continue to honour the contract, according to Seven Seas Country Manager Elton Georges.
But last week government told the Beacon that the disagreement remains unresolved, and that it still believes that Seven Seas’ purchase was a breach of the Biwater agreement.
Officials declined to provide any more details, but if the government were to take the issue to arbitration and win, then it would have the right to terminate the contract, according to documents that Seven Seas parent company AquaVenture Limited filed with the United States Securities and Exchange Commission as recently as Nov. 18.
Government sent AquaVenture a notice on Aug. 6, 2015 stating that it considered the acquisition of the water purchase agreement to be what that contract defines as an “assignment,” the company’s SEC reports state.
That would mean that the transaction would have required written consent from the government, which apparently did not occur.
“An assignment by Seven Seas Water (BVI) Ltd. of the water purchase agreement without consent may be deemed to be a company event of default under the terms of the water purchase agreement,” AquaVenture’s latest Form 10-Q states. “If a company event of default has occurred, the government of the BVI may deliver a notice of intent to terminate the water purchase agreement.”
However, AquaVenture wrote in the document that it does not consider the acquisition an assignment, a view that it expressed to government on Aug. 10, 2015.
“We responded in writing to the BVI government’s breach notice on Aug. 10, 2015 and subsequently provided the BVI government with additional materials regarding the acquisition,” AquaVenture stated. “Since the BVI government delivered the breach notice, the BVI government has continued to pay for water delivered in accordance with the water purchase agreement.”
AquaVenture notified investors of the dispute in SEC filings in late 2015 and throughout 2016, but Mr. Georges told the Beacon on Feb. 16 that “government has not raised the matter in over a year and the situation has not been an impediment to the parties reaching agreements in negotiations.”
‘There was a breach’
The Beacon reported on the disagreement and Mr. Georges’ statement in an article published last Thursday, and government did not respond to inquiries before that issue’s press deadline.
After the press deadline, however, the Ministry of Communications and Works responded in a brief e-mail.
“The disagreement is still being resolved and the ministry does not wish to comment at this moment,” stated MCW Information Officer Nekita Turnbull. “But there was a breach.”
If the disagreement is not resolved, the water purchase agreement provides for the dispute to be arbitrated at the London Court of International Arbitration.
If the London arbitrators side with government, then government could terminate the water purchase agreement and acquire possession of the desalination plant in Paraquita Bay — after paying the remaining roughly $33 million of a $43 million loan that was used to construct the Paraquita Bay desalination plant, according to AquaVenture’s SEC filings.
The no-bid water purchase agreement the Virgin Islands Party-led government signed with Biwater in 2010 has been heavily criticised by officials over the years.
Communications and Works Minister Mark Vanterpool has said that government could end up paying “hundreds of millions” over the contract’s life, and that the contract has greatly curtailed government’s ability to borrow money because it deems the territory responsible for guaranteeing the debts under the agreement.
Opposition legislator Julian Fraser, who was the CW minister when the agreement was signed, has defended the contract, saying that the price of water will fall to at least $6.80 after the contract’s first 12.5 years, and that government will take control of the plant when the deal expires in 2030.
Most recently, Mr. Vanterpool spoke at a press conference last month and said that he is renegotiating the agreement so that government can pay less than its current rate of $21.60 per 1,000 imperial gallons of water.
Mr. Vanterpool said at the Feb. 14 press conference that he expects the renegotiations to save government around $4 million annually, but he declined to say how he came up with that figure, or why Seven Seas is willing to renegotiate the 16-year contract that Biwater signed in 2010.
“I’ll give you that answer very soon,” he told this reporter, explaining that he’ll make an announcement when the renegotiations are finalised.